Unbiased Estimation, Price Discovery, and Market Efficiency: Futures Prices and Spot Prices

Chen, Rong; Zheng, Zhenlong

doi:10.1016/s1874-8651(09)60031-4

Cited by 20 publications

(14 citation statements)

References 12 publications

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“…Therefore, the futures efficiency defined in this group of studies is different from informational efficiency. We agree with Chen and Zheng (2008) that the efficiency tested in this group of studies should be called 'pricing efficiency', as they are fundamentally testing the no-arbitrage pricing model of futures. Pricing efficiency is as important as informational efficiency, because the risk management role of futures can only be fulfilled when the futures prices stay in a long-term equilibrium with spot prices.…”

Section: Two Theories On the Relationship Between Spot And Futures Prsupporting

confidence: 66%

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An investigation into the evolved relationship between spot and futures in the European Union Emission Trading Scheme

Lü

Wang

2011

IJGE

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This paper fills the gap in the literature that the functions of the European Union Allowance (EUA) futures have only been studied in the pilot phase of the European Union Emission Trading Scheme (EU ETS) and no market evolvement has been explored. The cost-of-carry pricing efficiency of the EUA futures and information spillover between the EUA spot market and futures market are examined in Phase I (2005)(2006)(2007) and Phase II (2008II ( -2012, respectively. First, it was found that only the December 2007 futures price was in long-run equilibrium with the spot price, but the relationship was not given by a cost-of-carry model. Second, the information spillover pattern also changed from Phase I to Phase II. The leading role of futures contract in price discovery can only be seen in Phase I, but not in Phase II. We conclude that, in the second phase of EU ETS, the market fundamentals are imposing stronger impacts on EUA price formation while the impact from speculation has weakened significantly.

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Section: Two Theories On the Relationship Between Spot And Futures Prsupporting

confidence: 66%

“…However, this will not be true in most cases since the systematic risk of most assets does not equal zero and most investors are not risk-neutral (Chen and Zheng, 2008). Therefore, for most assets, theoretically, the futures prices will not be the unbiased estimates of the future spot prices.…”

Section: Two Theories On the Relationship Between Spot And Futures Prmentioning

confidence: 99%

An investigation into the evolved relationship between spot and futures in the European Union Emission Trading Scheme

Lü

Wang

2011

IJGE

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“…With respect to the presence of bias implied by the risk premium, it is argued that futures prices are inherently biased on account of investor risk aversion and that they can provide unbiased estimates of future spot prices only when investors are risk neutral or the systematic risk of the underlying asset is zero (Kaminsky and Kumar [27], Chen and Zheng [28]). Thus, the finding of a risk premium in lumber futures market prices likely represents a rational market response of risk averse market participants rather than an irrational market bias.…”

Section: Discussion and Summarymentioning

confidence: 99%

Forecasting Performance of Lumber Futures Prices

Mehrotra¹,

Carter

2017

Economics Research International

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We test the forecasting power and information content of lumber futures prices traded on the Chicago Mercantile Exchange, from 1995 to 2013, at four forecast horizons. A Mincer-Zarnowitz regression finds evidence of statistically significant forecasting power at all forecast horizons. The results also support the presence of a time-varying risk premium for the shorter forecast horizons. A Granger causality test provides evidence that lumber futures prices lag spot prices in information assimilation over longer forecast horizons, while neither lagging nor leading over shorter forecast horizons.

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“…The efficiency of futures research institutes should be part of micro-efficiency. Chen and Zheng (2008) held that futures market efficiency includes pricing efficiency and information efficiency. Only a futures market with effective pricing can give full play to the functions of price discovery and risk management.…”

Section: Literature Reviewmentioning

confidence: 99%

A Study of the Efficiency of Futures Research Institutes of China

Wu¹,

Yao²,

Zhang³

2020

JAFEB

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The purpose of this study is to analyze the efficiency of research institutes of futures companies, and to promote the development of futures market and real economy. This study employs DEA-solver software to conduct super-efficiency data envelopment analysis (SE-DEA), and also selects 40 representative futures research institutes in China as decision-making units (DMUs). For data of input and output indicators, we collect from the China Futures Association, Futures Daily, Hexun.com and Webstock.com respectively, and the time duration is the 103 trading days between from October 2019 to February 2020. Then the indicator for the strategy accuracy rate is calculated separately by analyzing the strategies published by each DMUs in public media. In conclusions, most institutes have excessive investment in human resources, and also have insufficient strategy accuracy rate and insufficient published research reports. The findings of this study suggest that Chinese futures companies need to improve the efficiency of research institutes, and better meet the demand of the financial market. In fact, the analysis of the efficiency of the futures company research institute has not been found in the literature worldwide, Application of DEA model in efficiency analysis of securities and futures research institutions and establishment of indicators are the innovations of this paper.

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Unbiased Estimation, Price Discovery, and Market Efficiency: Futures Prices and Spot Prices

Cited by 20 publications

References 12 publications

An investigation into the evolved relationship between spot and futures in the European Union Emission Trading Scheme

An investigation into the evolved relationship between spot and futures in the European Union Emission Trading Scheme

Forecasting Performance of Lumber Futures Prices

A Study of the Efficiency of Futures Research Institutes of China

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